01—Abstract
Summary
Summary of the 10-K filed February 23, 2022. Cited figures are marked; the original filing is the authoritative source.
Texas Pacific Land Corporation (TPL) reported 2021 total revenues of $450.96 milliona and net income of $269.98 million, or $34.83 per basic and diluted share, compared with revenues of $302.56 million and net income of $176.05 million in 2020.
The Land and Resource Management segment generated $320.39 millionb of revenue and $208.90 million of net income, while the Water Services and Operations segment generated $130.57 million of revenue and $61.08 million of net income. Oil and gas royalty revenue was $286.47 million, up from $137.95 million, with the average realized equivalent price rising to $44.14 per Boe from $24.29 per Boe. Production averaged 18.6 thousand Boe per day, compared with 16.2 thousand in 2020.
The company completed its reorganization from a business trust into a Delaware corporation, Texas Pacific Land Corporation, on January 11, 2021, and its common stock trades on the NYSE under the symbol TPL. The company reports no debt or credit facilities and held $428.2 millionc of cash and cash equivalents at year-end 2021. It paid $85.3 million in dividends, or $11.00 per share, and repurchased $19.9 million of stock during 2021.
The board declared a quarterly dividend of $3.00d per share in February 2022. Management disclosed a material weakness in internal control over financial reporting related to accounting for income taxes, specifically the tax treatment of depletion on oil and gas royalty interests in prior-period returns. As a result, disclosure controls were not effective as of December 31, 2021.
The filing states the error led to understated income tax expense and income taxes payable for 2018 through 2020 and the first three quarters of 2021, and that management judged the out-of-period adjustment of $19.4 million not material. Deloitte & Touche LLP issued an adverse opinion on internal control over financial reporting while giving an unqualified opinion on the financial statements.
02—Key points
Key Highlights
- Total revenues rose to $450.96 million in 2021 from $302.56 million in 2020, and net income rose to $269.98 million from $176.05 million.
- Oil and gas royalty revenue was $286.47 million, up from $137.95 million, with realized equivalent prices of $44.14 per Boe versus $24.29 per Boe in 2020.
- The Water Services and Operations segment generated $130.57 million in revenue, up from $107.42 million, with water sales rising 14.7% in barrels sold.
- The company has no debt or credit facilities and held $428.2 million in cash and cash equivalents as of December 31, 2021.
- Shareholders received $11.00 per share in dividends in 2021, and the board declared a $3.00 per share quarterly dividend in February 2022.
- Management reported a material weakness in accounting for income taxes, resulting in ineffective disclosure controls and internal control over financial reporting as of December 31, 2021.
- Corporate Reorganization from a business trust to a Delaware corporation was completed January 11, 2021, with the company's stock listed on the NYSE as TPL.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 23, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $450.96M$302.56M | +49.0% |
| Operating Expenses | $88.56M$85.30M | +3.8% |
| Operating Income | $362.39M$217.26M | +66.8% |
| Net Income | $269.98M$176.05M | +53.4% |
| EPS (Basic) | $34.83$22.70 | +53.4% |
| EPS (Diluted) | $34.83$22.70 | +53.4% |
| Shares Outstanding (Basic) | 7.75M7.76M | −0.1% |
| Shares Outstanding (Diluted) | 7.75M7.76M | −0.1% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and net income in 2021?
The filing attributes the increase principally to a $148.5 million rise in oil and gas royalty revenue, driven by higher realized prices and increased royalty production. Oil and gas royalty revenue was $286.47 million in 2021 versus $137.95 million in 2020, with equivalent prices of $44.14 per Boe compared with $24.29 per Boe.
Does the company carry debt, and how is it returning cash to shareholders?
The filing states the company has no debt or credit facilities and no off-balance sheet arrangements as of December 31, 2021. In 2021 it paid $85.3 million in dividends, consisting of $11.00 per share, and repurchased $19.9 million of common stock, including settlements not yet completed at year-end.
What is the material weakness, and does it affect the financial statements?
The material weakness relates to the design of controls over periodic evaluation of historical tax returns, which led to an incorrect tax treatment of depletion going undetected until the fourth quarter of 2021. Management stated the resulting out-of-period adjustment of $19.4 million was not material to the financial position or results of operations for the current or any prior periods, and the auditor's opinion on the financial statements was unqualified. A remediation plan was implemented in the first quarter of 2022.
What are the main risks to the company's revenue?
The filing identifies oil and gas price volatility, decisions by operators on well investment and production, the reliance of land sales on market conditions, and customer spending levels for Water Services and Operations. It also cites decarbonization trends, cyber incidents, and COVID-19 as potential sources of adverse impact. Revenue from easements and surface-related income fell to $37.62 million from $41.40 million, and the filing notes that operator development decisions make this income unpredictable.
06—Continue